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We all know the Pareto Principle, which broadly states that 80% of the effects comes from 20% of the causes. Countless sales organizations have gotten themselves into deep trouble by mindlessly applying this principle to their sales organizations. I call it the Pareto Protocol.

Sales management thinks something like the following, “We’ve done an analysis and find that 80% of our sales comes from only 20% of our sales force. We need to fire 80% of our salesforce, which will lower our overhead and increase our profits!”

They think that if they can increase the sales of the 20%-super-producers by just 25% they won’t see any decline in revenues, while simultaneously realizing an 80% reduction in their base sales payroll. It sounds too good to be true, because it is.

I’ve seen the results when the Pareto Protocol is applied to sales organizations and it is consistently a disaster. I am fully aware that every sales organization has salespersons that need to find another career, or at the least be encouraged to work for a competitor.

I am also fully aware that every sales organization has its high producing heavy lifters, but to think that they can and will do even more lifting, all the time, is an ill-advised sales strategy.

Before your sales organization is tempted to partially or fully implement the Pareto Protocol, please consider the following:

1. Your top producers are in that position because they are already working at high capacity. Do they really have an additional 25%+ of bandwidth to give you?
2. You have salespeople at differing levels of development. Firing 80% of the sales force will undoubtedly nip many future super stars in the bud.
3. After applying the Pareto Protocol your sales force is now theoretically comprised exclusively of superstars; you’ve unintentionally created headhunter heaven. Be prepared for your superstars to be rapidly and easily gobbled up by your competitors.
4. Sometimes sales management tends to put their heads in the sand and pretend that everyone on the sales force has exactly the same opportunities. Not true. Accounts, products, geography, experience, sales management, etc. are variables that have to be accounted for and leveraged for each salesperson.

There is a normal distribution of sales capabilities within all sales organizations. Please see Sales Managers, Invest in Your Average Performers.

Sales management needs to focus on improving/removing the bottom 15%, improving the middle 70% and rewarding the top 15%. Sales management also has to look at its own skill levels at managing the sales force most effectively, but that’s for another post.

© 2008 Scott R. Sheaffer

Tags: career, fire, salespeople, turnover

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